BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 885| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 885 Author: Corbett (D), et al Amended: 8/18/10 Vote: 21 SENATE JUDICIARY COMMITTEE : 3-2, 3/23/10 AYES: Corbett, Hancock, Leno NOES: Harman, Walters SENATE FLOOR : 21-12, 6/3/10 AYES: Aanestad, Alquist, Cedillo, Corbett, DeSaulnier, Ducheny, Florez, Hancock, Kehoe, Leno, Liu, Lowenthal, Oropeza, Pavley, Price, Romero, Simitian, Steinberg, Wiggins, Wolk, Yee NOES: Ashburn, Calderon, Cogdill, Denham, Dutton, Huff, Negrete McLeod, Runner, Strickland, Walters, Wright, Wyland NO VOTE RECORDED: Correa, Cox, Harman, Hollingsworth, Padilla, Vacancy, Vacancy ASSEMBLY FLOOR : 50-26, 8/23/10 - See last page for vote SUBJECT : Gift cards: dormancy fees: redemption SOURCE : Author DIGEST : This bill deletes exemptions to applying dormancy fees on gift certificates, thus prohibiting them, as specified. CONTINUED SB 885 Page 2 Assembly Amendments delete the Senate version provision requiring a retailer of gift certificates to disclose that a gift certificate with a value of less than $10 may be redeemed for cash, for its cash value. ANALYSIS : Existing law: 1. Makes it unlawful to sell a gift certificate that contains an expiration date or a service fee, including, but not limited to, a service fee for dormancy. 2. Requires any gift certificate sold after January 1, 1997, to be redeemable in cash for its cash value, or replaceable with a new gift certificate at no cost to the purchaser or holder. 3. Requires any gift certificate with a cash value of less than $10 to be redeemable in cash for its cash value. 4. Exempts from the requirements above, the following gift certificates issued on or after January 1, 1998, with the expiration date appearing in capital letters in at least 10-point font on the front of the gift certificate: A. Those distributed by the issuer to a consumer pursuant to an awards, loyalty, or promotional program for free; B. Those donated or sold below face value at a volume discount to employers or to nonprofit and charitable organizations for fundraising purposes if the expiration date on those gift certificates is less than 30 days after the date of sale; and, C. Gift certificates that are issued for perishable food products. 5. Exempts dormancy fee requirements for the following gift cards when: A. The remaining value of the gift card is $5 or less each time the fee is assessed; SB 885 Page 3 B. The fee does not exceed $1 per month; C. There has been no activity on the gift card for 24 consecutive months, including, but not limited to, purchases, adding value, or balance inquiries; D. The holder may reload or add value to the gift card; and, E. A statement is printed on the gift card in at least 10-point font stating the amount of the fee, the frequency of the fee, that the fee is triggered by inactivity of the gift card, and when the fee will be charged. The statement may appear on the front or back of the gift card, but shall appear in a location where it is visible to any purchaser prior to purchase. This bill deletes exemptions to applying dormancy fees on gift certificates, thus prohibiting them, as specified. Prior Legislation SB 250 (Corbett), Chapter 640, Statutes of 2007 Background Over the last several years, gift cards have become increasingly popular as a means of gift-giving. According to TowerGroup, a financial consulting firm, Americans spent $88.4 billion on gift cards in 2008, but left $6.4 billion unspent and more than $100 million in gift card value was "compromised" in bankruptcies and liquidations. Also according to TowerGroup, in 2009, Americans spent $87 billion on gift cards, an estimated $5 billion of which will go unredeemed. It is also reported that, in the U.S., 40 percent of recipients do not use the full value of their gift cards. Often the unredeemed amounts go back to the retailers as revenue. This is a staggering amount of money for consumers to lose. Because of the concerns outlined above, Senator Corbett authored SB 250. SB 250 allowed any gift certificate with a cash value of less than $10 to be redeemed in cash for its cash value. The bill exempted donated gift SB 885 Page 4 certificates and gift certificates for perishable food products from existing law's restrictions on expiration dates and service fees. SB 885 is intended to build upon and strengthen SB 250 by giving California consumers the full value of their gift cards by allowing them to redeem for cash gift cards with a cash value of less than $20. Additionally, the bill would delete the dormancy fee provisions, which would also ensure that consumers receive the full value of their gift cards. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 5/28/10) California Labor Federation California Public Interest Research Group Congress of California Seniors Consumer Action Consumer Attorneys of California Consumer Federation of California Consumers Union ARGUMENTS IN SUPPORT : According to the author's office: In these difficult economic times, consumers should have the right to ready access to liquid assets, including the cash value of their gift cards. The remainder on their unused gift cards could make the difference in paying bills and making ends meet. This problem is so common that around $5 billion in gift cards goes unspent every year. After a few years the retailer gets to claim the consumer's money as profit without supplying a product or paying sales tax. Companies have claimed as much as $43 million in profit from unspent gift cards in one year. While consumers gained new rights under SB 250 (Corbett, Ch. 640, Stats. 2007), many retailers are refusing to comply with the law. Starbucks was taken to court in three counties by the District Attorney and agreed to pay $225,000 in civil penalties for not SB 885 Page 5 complying with the law. ASSEMBLY FLOOR : AYES: Ammiano, Arambula, Bass, Beall, Block, Blumenfield, Bradford, Brownley, Buchanan, Caballero, Charles Calderon, Carter, Chesbro, Coto, Davis, De La Torre, De Leon, Eng, Evans, Feuer, Fong, Fuentes, Galgiani, Gatto, Hayashi, Hernandez, Hill, Huber, Huffman, Jones, Lieu, Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, V. Manuel Perez, Portantino, Ruskin, Salas, Saldana, Skinner, Solorio, Audra Strickland, Swanson, Torlakson, Torres, Torrico, Yamada, John A. Perez NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill, Conway, Cook, DeVore, Fletcher, Fuller, Gaines, Garrick, Gilmore, Hagman, Harkey, Jeffries, Knight, Logue, Miller, Nestande, Niello, Nielsen, Norby, Silva, Smyth, Tran, Villines NO VOTE RECORDED: Furutani, Hall, Vacancy, Vacancy RJG:nl 8/24/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****